After a smaller than expected GDP loss in 2022 of -2.1%, Russia has slipped through the NATO sanctions net and is projected by the IMF to see growth of 0.3% in 2023.  Western media proponents, shocked by this development, are wondering how this could be? (Report starts at 15:43)

Only months ago, political leaders and mainstream economists were expecting the complete fiscal destruction of Russia, leaving the nation in economic ruins and ending any chance of a continued military presence in Ukraine.  Joe Biden pledged to “crater” Russia’s economy, stating that Vladimir Putin “had no idea what was coming.”  French Finance Minister Bruno Le Maire predicted Russian collapse after the first wave of Western sanctions.  Politico lauded the “benefits” of the coming disintegration of the Russian Federation.  The propaganda has obscured certain economic realities that should have been obvious. 

The development of Russian economic resilience is not a surprise to those in the alternative media, who pointed out a year ago that Russia’s primary trading partners including China, India and Brazil make up a third of the world’s population and around 24% of global GDP.  They are also production based countries which manufacture a large portion of the world’s goods.  Russia is rich in raw commodities and resources including oil and natural gas, allowing for profitable trading opportunities for nations willing to ignore western sanctions.

Far from severing trade relations between the BRICS nations, US and NATO efforts to wage economic warfare over the Ukraine conflict have instead brought the countries closer together.  The BRICS are now engaged in bilateral trade which cuts out the US dollar as the world reserve currency and China is pursuing stronger military ties to Russia on top of its increased purchases of Russian commodities.

Given the rising potential for future hostilities between the US and China, their closer associations with Russia could impede the defense of Taiwan or other allies in the Pacific.  In other words, the US government has potentially sabotaged its own interests. 

The IMF’s recent report in global economic health indicates that Russia, despite all the media claims of imminent catastrophe, is relatively unaffected by sanctions and its removal from the SWIFT network.  Regardless of what “side” one supports in the ongoing Ukraine conflagration, one has to admit that financial weapons have been mostly ineffective.  Rather, what sanctions have revealed is that a global consensus on Ukraine simply doesn’t exist, and this reality runs contrary to the prevailing narrative the public has been told for the past year.         

Authored by Kevin Stocklin via The Epoch Times (emphasis ours),

As corporations increasingly take up progressive political causes like racial equity and climate change, some watch with despair or disdain. Conservative entrepreneurs see a business opportunity.

“There’s a huge market for them,” Mark Meckler, president of Convention of States Action (COSA), told The Epoch Times. As a former CEO of Parler, he knows how brutal it can be to go up against dominant, established competitors. Success is not guaranteed.

But citing conservative companies like Black Rifle Coffee and Patriot Mobile, Meckler said, “if you think about it, you’re talking half the country” as a potential market. “Of the voting age public, you’re probably talking 75–80 million people that would like to partake in these kinds of products.”

“If I were not doing politics right now, that’s the space I would be in,” he said. “I would be looking at every market segment that I could and I would be starting every kind of conservative company that I could.”

Connor Boyack, president of Libertas Institute and writer and publisher of the “Tuttle Twins” children’s books, concurs.

“I believe we need way more entrepreneurs in this space,” Boyack told The Epoch Times, “providing products and services for families to learn about and act upon the ideas of a free society.”

Breaking Into Publishing

Like many well-known children’s authors, he wrote his first book in the “Tuttle Twins” series for his own kids. And like many well-known children’s authors, he took his books to the established publishing houses, who were not interested.

“So we just decided to launch the ‘Tuttle Twins’ as an independent project, published directly by our company,” he said. “In retrospect, that was exactly the right move for us because it afforded us creative control. We’re not at the mercy of anyone who can cancel us or undermine what we’re trying to do.”

While many schools are teaching kids about socialism and racial ideology, Boyack’s books touch on ideas like preserving liberty, the Golden Rule, and how free markets work, topics that “help children develop critical thinking skills about real-world concepts.” Between 2014 and 2019, they sold 750,000 books. In 2020, they sold 1.3 million, and in 2021 they sold 1.7 million.

“The freedom movement has been playing defense for decades. We have been letting our ideological adversaries educate our children, and waiting until they become adults before we communicate our ideas to them,” Boyack said. “By then, it’s already too late because they’ve already become firmly established in a worldview that they’ve developed as a result of their schooling, social media, and so forth.”

Building a Cell Phone Company

Patriot Mobile, a conservative phone service provider that covers all 50 states, has had similar success.

“There was a very liberal cell phone company that was funding some races in Florida and across the nation, and that’s where our founders got the idea: Wow, we could have our own cell phone company and do conservative things with the profits,” Leigh Wambsganss, chief communications officer at Patriot Mobile, told The Epoch Times. “Our mission is to protect our God-given rights.”

Patriot Mobile was able to build its cell phone service company by interfacing with towers owned by other cell phone companies. It has been a long road getting all the systems and access set up, but today “we’re growing by leaps and bounds,” she said. The company grew by 75 percent in 2020 and 110 percent in 2021.

“Every impediment, we stop and pray,” she says. “It helps us make really solid decisions. Because we’re a Christian company, our business exists to glorify God.”

A Gift Becomes a Business

For Egard Watches, it all started with the idea that founder and CEO Ilan Srulovicz had a decade ago to give his father a gift.

“My dad helped me smooth a lot of things in my life, and I wanted to find a way to honor him,” Srulovicz said. “I thought it would be really nice to buy him a nice watch, but I couldn’t find one that really represented what I wanted.”

Instead, while working in 3D modeling at a visual-effects studio, he made one himself. “It kind of went from there,” he said, with more and more people wanting to buy his designs.

“There are two types of customers who are attracted to the company,” Srulovicz explains. “There’s the customer who wants something very unique from a kind of micro brand, and they’re getting a lot of value of their money.” Others, he said, “connect to our brand story. People connect to the messages we put out.”

Heading into the COVID years, Egard Watches became known as a company that swam against the ideological tide. Srulovicz was vocal in pushing back against movements like defunding the police, “toxic masculinity,” censorship of speech, and vaccine mandates.

“I’m a first-generation American, whose mother escaped Iraq,” Srulovicz said. “My dad’s family was killed off in the Holocaust.” This has given him an appreciation for “traditional, foundational American values,” he said.

“I believe in gender roles. I believe that the police have a very important value in society. And I believe in individual freedom. I’m very much pro- the right of people to speak, even if I disagree with them,” he said. “So I’m putting out these messages constantly in the hopes of inspiring other companies to do the same thing. We don’t need to just sit in the corner and be quiet and hope for the best.”

Read more here…

In a Friday press conference Ukrainian President Volodymyr Zelensky signaled he’s open to China’s new ceasefire plan which has been subject of widespread reporting after it was introduced Friday morning.

“I believe that the fact that China started talking about Ukraine is not bad, but the question is what follows the words,” Zelensky said, according to The Associated Press.

This despite the 12-point Chinese proposal taking a clear anti-Western position, given it condemned NATO expansion while also calling on the “relevant countries” to “stop abusing unilateral sanctions” and “do their share in de-escalating the Ukraine crisis”.

But Zelensky still went so far as to say he wants to meet with China’s leader Xi Jinping to discuss the proposals, perhaps motivated by a sense that Xi could have significant sway with President Putin, making acceptable ceasefire terms more of a reality.

“I plan to meet Xi Jinping and believe this will be beneficial for our countries and for security in the world,” Zelensky said.

According to the BBC:

Speaking on the first anniversary of Russia’s full-scale invasion, he said the proposal signaled that China was involved in the search for peace.

“I really want to believe that China will not supply weapons to Russia,” he said.

Despite this unexpected potential diplomatic opening, the White House batted it down, with President Biden telling ABC News on Friday: “[Russian President Vladimir] Putin’s applauding it, so how could it be any good?“

“I’ve seen nothing in the plan that would indicate that there is something that would be beneficial to anyone other than Russia,” he added.

Moscow in the meantime, has repeatedly charged both Washington and the UK with actively plotting to thwart ceasefire negotiations, while NATO countries have said it’s Russia’s ongoing aggression to blame, and that there could be immediate peace if it withdraws all troops.

Eric Schwerin, a close business associate of Hunter Biden who also dealt with Joe Biden’s business and tax affairs, is now working with House GOP investigators looking into Biden family dealings – particularly in Ukraine and China, where the family collected millions of dollars, Just the News reports.

“He is cooperating with us,” House Oversight and Accountability Committee Chairman James Comer (R-KY) told the outlet.

“His attorneys and my counsel are communicating on a regular basis. Now, I feel confident that he’s going to work with us, and provide us with the information that we have requested,” Comer continued. “I think that Schwerwin is going to be a very valuable witness for us in this investigation.”

Of note, Schwerin, the former president of Hunter Biden’s now-dissolved investment firm Rosemont Seneca Partners, visited the White House at least 19 times from 2009 to 2015, according to White House visitor log records reviewed by The Epoch Times and first reported by the New York Post.

Schwerin’s cooperation comes after the committee received word that Hunter and his uncle, James Biden, don’t plan to be forthcoming with all the information Comer’s committee has sought in their wide-ranging probe.

According to Comer, subpoenas are imminent for non-cooperating witnesses.

“We know individuals, many are cooperating with us now, but others, not so much,” he said. “We’re going to start subpoenaing people in the private sector, we’re going to start subpoenaing financial institutions to get us the information. And then we’ll go from there.”

Comer then suggested that if innocent, Hunter Biden would want to clear his name in front of the committee.

“He could come in front of the House Oversight Committee right now and defend his good name,” Comer said. “He would have 20 Democrats that would definitely support him, and he could make 26 Republicans look bad if all this information we have from his laptop, all the emails that were in his own words, all the audio that are in his own voice, if for some reason we’re misinterpreting that, then he could make us look bad.

“But we all know that this family was involved in influence peddling. And this administration is doing everything in its ability to try to block oversight.”

Both Joe Biden and Hunter Biden have denied the family did anything wrong, although Hunter Biden has acknowledged he is under federal criminal investigation on tax issues.

Comer said while the committee battles the White House and the Biden family for information, Schwerin’s cooperation was a breakthrough that could spur other key witnesses to cooperate. –Just the News

According to White House visitor logs, Schwerin met directly with then-Vice President Joe Biden in the West Wing on Nov. 17, 2010, and had several meetings with White House aides during times when Hunter Biden was securing multi-billion dollar deals overseas, including in China.

Meanwhile, as The Epoch Times reported last year, the NY Post revealed that Hunter had set up a meeting between his father and Andrés Pastrana Arango, the former president of Colombia, on March 2, 2012.

Before the March 2012 meeting, Hunter Biden and his partners at Rosemont Seneca Partners were allegedly seeking business with Brazilian construction company OAS, according to emails from the laptop, the Post reported. The Brazilian firm was interested in several projects in Columbia at the time, including a hydroelectric power plant worth $1.8 billion and a renovation project to a subway system in Bogota worth $3 billion.

“If it works, we’ll all be rich,” Schwerin wrote to Hunter Biden in an email in August 2011, according to the Post. Emails showed Hunter Biden traveling to Bogota in November 2011.

Will Comer ask Schwerin about Ukraine biolabs?

Many were wondering if Warren Buffett would address his recent unwind of Berkshire’s $4+ billion stake in Taiwan Semi – a brand new position that had catapulted into the investing conglomerate’s Top 10 holdings as of Sept 30 ’22 only to see it slashed by 86% just one quarter later…

… and this morning, when Buffett filed the latest Berkshire annual letter, they got the answer: an unequivocal no.

So what did Buffett talk about in his latest and – at just barely 9 pages – shortest ever letter since Berkshire launched the practice of recapping his investment principles, activities and results some 46 years ago in 1977? Nothing that he hasn’t addressed on countless previous occasions. Below we summarize some of the key highlights.

First, here is a snapshot of Berkshire Q4 financials:

Q4 profit fell, reflecting lower gains from investments and foreign currency exchange losses as the U.S. dollar lost value. Quarterly net income fell 54% to $18.16 billion, or $12,412 per Class A share, from $39.65 billion, or $26,690 per share, a year earlier.

Of course, as is well-known, Buffett despises GAAP earnings  and instead urges investors to look at operating earnings instead which strip away the quarterly fluctuations of the conglomerate’s public stock investments (i.e. unrealized gains/losses).

The GAAP earnings are 100% misleading when viewed quarterly or even annually. Capital gains, to be sure, have been hugely important to Berkshire over past decades, and we expect them to be meaningfully positive in future decades. But their quarter-by-quarter gyrations, regularly and mindlessly headlined by media, totally misinform investors.

For the 4th quarter, Berkshire generated $6.71BN in operating profis, down 8% from $7.29BN a year ago. Earnings fell as its rail road business and insurance operations saw softer results amid higher prices for materials and labor. That, however, did not dent the billionaire investor’s belief in the resiliency of the US economy, as he touted Berkshire’s record operating earnings of $30.8 billion for the year.

Berkshire repurchased $2.6 billion of its own stock in the quarter, the most since Q1, and boosting full-year buybacks to $7.9 billion. Buffett also noted that some of Berkshire’s biggest investments such as Apple and American Express, also engaged in sizable stock buybacks.

Despite the buybacks, the company’s cash hoard jumped by $20 billion in Q4 to $128.6 billion, the 9th largest cash stockpile in the company’s history.

The cash mountain was so large that interest income alone in 2022 soared by 186% to $1.1 billion “primarily due to significant increases in interest income due to interest rate increases during the year.”

Financials aside, here are some of the notable highlights from Buffett’s annual letter to investors.

On success:

In 58 years of Berkshire management, most of my capital-allocation decisions have been no better than so-so. In some cases, also, bad moves by me have been rescued by very large doses of luck. (Remember our escapes from near-disasters at USAir and Salomon? I certainly do.)… The lesson for investors: The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.

On Berkshire’s float:

Aided by Alleghany [a purchase made in late 2022], our insurance float increased during 2022 from $147 billion to $164 billion. With disciplined underwriting, these funds have a decent chance of being cost-free over time. Since purchasing our first property-casualty insurer in 1967, Berkshire’s float has increased 8,000-fold through acquisitions, operations and innovations. Though not recognized in our financial statements, this float has been an extraordinary asset for Berkshire.

On stock buybacks… and a rare jab at Joe Biden (or rather, Joe Biden’s handlers) from Buffett, a consummate, Hillary Clinton-supporting Democrat:

A very minor gain in per-share intrinsic value took place in 2022 through Berkshire share repurchases as well as similar moves at Apple and American Express, both significant investees of ours. At Berkshire, we directly increased your interest in our unique collection of businesses by repurchasing 1.2% of the company’s outstanding shares. At Apple and Amex, repurchases increased Berkshire’s ownership a bit without any cost to us.

Gains from value-accretive repurchases, it should be emphasized, benefit all owners – in every respect. Imagine, if you will, three fully-informed shareholders of a local auto dealership, one of whom manages the business. Imagine, further, that one of the passive owners wishes to sell his interest back to the company at a price attractive to the two continuing shareholders. When completed, has this transaction harmed anyone? Is the manager somehow favored over the continuing passive owners? Has the public been hurt? When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).

On corporate profits:

In aggregate, the S&P500 earned $1.8 trillion in 2021. I don’t yet have the final results for 2022. Using, therefore, the 2021 figures, only 128 of the 500 (including Berkshire itself) earned $3 billion or more. Indeed, 23 lost money. At year-end 2022, Berkshire was the largest owner of eight of these giants: American Express, Bank of America, Chevron, Coca-Cola, HP Inc., Moody’s, Occidental Petroleum and Paramount Global.

On beating expectations and the “deep desire to deceive”:

Even the operating earnings figure that we favor can easily be manipulated by managers who wish to do so. Such tampering is often thought of as sophisticated by CEOs, directors and their advisors. Reporters and analysts embrace its existence as well. Beating “expectations” is heralded as a managerial triumph. That activity is disgusting. It requires no talent to manipulate numbers: Only a deep desire to deceive is required. “Bold imaginative accounting,” as a CEO once described his deception to me, has become one of the shames of capitalism.

On cash as preparation for the future:

As for the future, Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses. We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses. Our CEO will always be the Chief Risk Officer – a task it is irresponsible to delegate. Additionally, our future CEOs will have a significant part of their net worth in Berkshire shares, bought with their own money.

On the difference between “efficient” public and private markets:

One advantage of our publicly-traded segment is that – episodically – it becomes easy to buy pieces of wonderful businesses at wonderful prices. It’s crucial to understand that stocks often trade at truly foolish prices, both high and low. “Efficient” markets exist only in textbooks. In truth, marketable stocks and bonds are baffling, their behavior usually understandable only in retrospect…. Controlled businesses are a different breed. They sometimes command ridiculously higher prices than justified but are almost never available at bargain valuations. Unless under duress, the owner of a controlled business gives no thought to selling at a panic-type valuation.

On taxes:

During the decade ending in 2021, the United States Treasury received about $32.3 trillion in taxes while it spent $43.9 trillion…. Huge and entrenched fiscal deficits have consequences. The $32 trillion of revenue was garnered by the Treasury through individual income taxes (48%), social security and related receipts (34 1⁄2%), corporate income tax payments (8 1⁄2%) and a wide variety of lesser levies. Berkshire’s contribution via the corporate income tax was $32 billion during the decade, almost exactly a tenth of 1% of all money that the Treasury collected. And that means – brace yourself – had there been roughly 1,000 taxpayers in the U.S.matching Berkshire’s payments, no other businesses nor any of the country’s 131 million households would have needed to pay any taxes to the federal government. Not a dime.

At Berkshire we hope and expect to pay much more in taxes during the next decade. We owe the country no less: America’s dynamism has made a huge contribution to whatever success Berkshire has achieved – a contribution Berkshire will always need. We count on the American Tailwind and, though it has been becalmed from time to time, its propelling force has always returned.

On Buffett’s traditional optimism about the US:

I have been investing for 80 years – more than one-third of our country’s lifetime. Despite our citizens’ penchant – almost enthusiasm – for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future.

He ends with several Charlie Munger (who will be 100-years-old soon) aphorisms.

• The world is full of foolish gamblers, and they will not do as well as the patient investor.
• If you don’t see the world the way it is, it’s like judging something through a distorted lens.
• All I want to know is where I’m going to die, so I’ll never go there. And a related thought: Early on, write your desired obituary – and then behave accordingly.
• If you don’t care whether you are rational or not, you won’t work on it. Then you will stay irrational and get lousy results
• Patience can be learned. Having a long attention span and the ability to concentrate on one
• thing for a long time is a huge advantage.
• You can learn a lot from dead people. Read of the deceased you admire and detest.
• Don’t bail away in a sinking boat if you can swim to one that is seaworthy.
• A great company keeps working after you are not; a mediocre company won’t do that.
• Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.
• Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s a weighing machine.” If you keep making something more valuable, then some wise person is going to notice it and start buying.
• There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice.
• You don’t, however, need to own a lot of things in order to get rich.
• You have to keep learning if you want to become a great investor. When the world changes, you must change.
• Warren and I hated railroad stocks for decades, but the world changed and finally the country had four huge railroads of vital importance to the American economy. We were slow to recognize the change, but better late than never.
• Finally, I will add two short sentences by Charlie that have been his decision-clinchers for decades: “Warren, think more about it. You’re smart and I’m right.”

Full letter below (pdf link).

In 2009, there was one cryptocurrency: bitcoin.

Now there are more than 9,000 cryptocurrencies and many digital assets with other uses.

Visual Capitalist’s Jenna Ross and Miranda Smith note that as the ecosystem becomes more complex, investors need more structure and clarity to make sense of how assets relate.

In this graphic from MSCI, we introduce a new classification framework known as Datonomy. It is the first in a two-part series on decoding digital assets.

The Main Uses of Digital Assets

MSCI collaborated with Coin Metrics and Goldman Sachs to develop the framework, which classifies digital assets according to what they are primarily used for. It is hierarchical with three levels of classifications: classes, sectors, and subsectors.

We show the first two levels in the table below, along with examples of each sector.

Let’s take a closer look at one sector within each class.

• Specialized Coins facilitate value transfer on the blockchain for users with a specific interest, such as privacy, social community, or cross-border payments. Meme coins like Dogecoin fall under this sector, as do cryptocurrencies like Monero where every user is anonymous by default.

• Smart Contract Platforms are tokens native to blockchain protocols that facilitate the execution of smart contracts and power a diverse set of decentralized applications. Following an “if this, then that” structure, smart contracts are essentially digital agreements that automatically execute when the terms are met. Ethereum is an example of a smart contract platform.

• Decentralized Finance tokens provide the user with economic interest, trading power, or an on-chain alternative to traditional financial services and products. The sector includes things like exchanges (such as Uniswap), peer-to-peer loans, prediction markets for betting, and asset management.

• Stablecoin tokens are pegged to a sovereign-issued currency to offer access to blockchain apps without exposure to price action in digitally native tokens. An example of a stablecoin is Tether, which has a 1-to-1 peg with a matching fiat currency such as the U.S. dollar.

A Structural Lens for Investors

As the digital assets universe continues to expand and evolve, investors need a consistent way to analyze the market.

Datonomy and its related data analytics aim to help investors seeking to monitor market trends, analyze portfolio risk and return, and build new products.

Get insight on digital assets with MSCI’s data service, datonomy.

Authored by Susan Crabtree via RealClear Wire,

Sen. Mark Kelly, who previously served as a decorated space shuttle pilot with NASA, waded into the Chinese spy balloon uproar early this week after keeping publicly mum about it for several weeks.

The Arizona Democrat said it makes no sense for the U.S. military to launch expensive missiles at weather balloons or other benign floating objects. Kelly was referring to a heat-seeking, air-to-air missile used in recent weeks to shoot down several high-flying aerial objects that the administration later suggested likely didn’t pose a threat. Earlier in the month, a U.S. Air Force F-22 shot down a Chinese surveillance balloon after it breached American airspace and floated across the country, setting off a firestorm in Washington.

Kelly, who is set to be inducted into the U.S. Astronauts Hall of Fame in May, says he’s working on legislation that would require weather balloons to carry transponders that would communicate with air traffic control systems to separate research balloons from mysterious objects.

“It would really help the Defense Department to be able to sort out what is civilian science payload, what’s a weather balloon, what’s a NASA balloon, what’s a private company in the United States doing, what might be even a U.S. military,” Kelly, who was tapped to chair a Senate Armed Services subcommittee amid the balloon controversy, told the Associated Press.

Sen. John Tester, a Montana Democrat who is heading up the investigation into how a Chinese surveillance balloon was allowed to pass over crucial U.S. missile sites, including some in his state, was more forceful.

“We’re going to get to the bottom of what happened and make sure we have a plan going forward to detect and then find out what potential problems this balloon may have caused,” Tester told Fox News.

China’s high-altitude spy balloon controversy appears to have taken most Washington lawmakers and the intelligence community by surprise, but it really shouldn’t have. China’s interest in these stratospheric dirigibles has been an open secret for nearly a decade.

Kelly himself has first-hand knowledge of China’s investments in near-space balloon technology. The Arizona senator co-founded a balloon space-exploration company named World View in 2012. Just two years later, he helped facilitate investments for the firm from Chinese tech giant Tencent, RealClearPolitics reported in 2020. Kelly’s eldest daughter, Claudia Kelly, served as World View’s business opportunity manager from 2016 to 2019, according to her LinkedIn profile.

Tencent is one of the world’s largest Internet enterprises and owns the popular social media platform WeChat, a texting application with more than one billion users worldwide.

In recent years Tencent has faced international bans and scrutiny over its practice of monitoring the activity of its users inside and outside China and for the Chinese government’s use of the data as a key component in its mass surveillance and persecution of the Uyghur population and other minorities, as well as dissidents – even those who have escaped China.

In 2020, President Trump issued an executive order banning it and the popular social media app TikTok in the United States. But a U.S. district court judge issued an injunction blocking the order several months later. President Biden withdrew the order in 2021, while directing the Commerce Department to investigate foreign influence enacted through the apps.

To be fair to Kelly and his role in facilitating the Tencent investment in World View, in 2014, WeChat’s surveillance applications in China were either not widely known or weren’t yet fully instituted.

When the Tucson-based company was first launched, it focused on space tourism with plans to charge $75,000 per commercial passenger on flights to near outer space in a capsule attached to a giant helium balloon. By 2015, the company shifted to contracting with NASA and the Department of Defense to use the balloon, known as a stratollite, to carry unmanned payloads for extended periods and provide imagery of the earth with a resolution sharp to five centimeters, far better than satellites can offer.

Kelly served as a strategic adviser to World View until launching his senate campaign in 2019. According to his 2019-2021 financial disclosure report and amendments filed with the Senate as required, he maintained a $100,000-$250,000 financial stake in the company.

It’s unknown how much the stock is worth now – or whether Kelly still owns it. After this investment and others drew scrutiny in his Senate campaign, in 2021 Kelly moved his assets to a blind trust, a formal arrangement in which lawmakers officially transfer management of their financial assets to an independent trustee to oversee.

Kelly has at least one other tie to Tencent. His 2020 Senate campaign accepted $5,000 from David Wallerstein, Tencent’s chief exploration officer, responsible for the company’s operations outside mainland China and business initiatives with multinational partners.

Neither Kelly nor World View has disclosed the total amount of investments the company received from Tencent. In the fall of 2014, Jane Poynter, the then-CEO of World View Enterprises, announced during a visit to Beijing that Tencent had invested an undisclosed sum in the venture. In April 2016, as part of a subsequent $15 million investment round, World View announced that it had received more funds from Tencent and three other venture capital firms.

Chinese news reports from November 2014 quoting Poynter show that Kelly was instrumental in securing the first Tencent investment. In an article in the Oriental Morning Post, translated from Mandarin, Poynter is quoted as saying that a “Tencent American leader named David met Mark Kelly, a space pilot of our team.”

“After Mark introduced him to space travel technology, David was very interested and willing to invest at this stage,” she added. “When I choose a partner, I value the contribution this partner can bring to the project, and Tencent can push our cooperation to China. I think it is very important.”

Back in 2020, the company did not respond to several RCP requests to clarify Poynter’s statements about Kelly’s role in facilitating the Tencent investments and what Poynter meant when she touted Tencent’s ability to “push our cooperation to China.”

Another article in English-language newspaper China Daily elaborated on how Tencent became involved in World View. Poynter told the paper that Wallerstein “has already met with one of World View’s pilots and exchanged ideas on future technology and that she considered the passion and contribution that Tencent could give to the project of “huge significance to her operation.”

Jacob Peters, who served as a Kelly campaign spokesman, in an email exchange with RCP in 2020, confirmed that Kelly was a World View co-founder and that “in the early stages, he spoke to many people about his experiences as a pilot and astronaut.”

He argued that Tencent has “no influence in the company’s day-to-day business” and referred questions about the company’s future to World View.

Peters touted World View’s work with the Department of Defense and NASA and its role in creating jobs and generating millions for Arizona’s economy.

He didn’t mention, however, that World View never reached its job-creation goals, promised as part of a deal to allow the company to lease a $15 million county facility for no upfront costs. It also experienced several setbacks in its early years, including an explosion of a stratospheric balloon during ground testing in 2019 that caused more than $475,000 in damages to the company’s county-owned building, and ceiling tiles to fall on employees at a Raytheon missile storage facility near the property.

No one from Kelly’s Senate office, including Peters, his press secretary, responded to several email inquiries from RCP over the last week. World View’s press office also didn’t respond to several inquiries.

From 2014 to 2016, when World View was a new start-up company, U.S.-China relations were far less acrimonious than they are now. However, there were still grave intelligence concerns about their government’s theft of U.S. intellectual property and outright hacking of U.S. government agencies and private companies.

For more than a decade U.S. law has barred American astronauts from working with China in space due to security concerns. In 2012, National Security Agency Director Keith Alexander said China’s cyber espionage of U.S. intellectual property constituted the “greatest transfer of wealth in history.” And in 2014 and 2015, the U.S. formally blamed China for hacking into the Office of Personnel Management, compromising the personal data of hundreds of thousands of federal workers, including all who had applied for top secret clearances.

In his blind trust filings with the Senate, Kelly also reported having a $100,001-$250,000 stake in Boom Technology, a high-speed aircraft company in Colorado that partnered with a Chinese based travel company to help “bring supersonic flight to China.”

World View executives have repeatedly denied sharing any technology information with Tencent. But the near-space travel business model was something the company openly marketed, and Chinese companies apparently were eager to copy it.

In 2016, the same year of TenCent’s second investment in World View, a Chinese company, Kuang-Chi Science, poured a whopping $1.5 billion into a space balloon tourism business. ArsTechnica, a website covering news and opinions about technology and science, reported that the Kuang-Chi operations “appears to be similar to that of an American company, World View Enterprises.”

Citing the Chinese company’s website and a China Daily report, ArsTechnica said human flights would reach an altitude of 24 kilometers (about 15 miles) and “then cruise for two to three hours before a controlled descent.”

“If this experience sounds a bit familiar, that’s because it seems modeled after that of Tucson, Arizona-based World View, which plans to fly six passengers in a pressured cabin to an altitude of 30km,” the website noted.

When RCP reached out to World View in 2020, Ashley Smith, a company spokeswoman, downplayed Tencent’s level of investment, calling the Chinese company “an early investor” that now maintains “less than 5% in common stock.”

“They do not have a seat on the board, means of control, or any access to inside information about the company or its technology,” she told RCP at the time.

Since World View shifted its focus to the unmanned stratollites for Earth observation, which have defense applications, Smith said, “World View has not taken foreign investment and has reported all foreign interest and its entire ownership structure to the Defense Counterintelligence Security Agency (DCSA) to obtain security and facility clearance.”

The DCSA “has concluded that foreign interests do not have any influence, control, or authority over World View,” Smith added.

However, when RCP contacted DCSA directly to verify that it had given World View its seal of approval, the DCSA Office of Communications and Congressional Affairs denied that it had offered a clearance for World View.

The agency told RCP in an email that in January 2020, it had suspended the process to grant World View a clearance for defense work, though it would not disclose the “internal deliberations” or “specific communications” that led to the decision.

The international uproar over China’s spy balloon comes at a sensitive time for World View. In January, the company announced plans to go public in a merger with special-purpose acquisition company Leo Holdings, a deal worth $350 million. It’s expected to close in the second quarter of this year.

Last November, World View also announced a partnership with Sierra Nevada Corp, an American aerospace and national security contractor, to jointly operate balloons for defense “intelligence, surveillance, and reconnaissance.”

Over the last several years, plenty of U.S. China experts have been warning about Chinese investment in the U.S. space industry. A 2018 article in The Hill newspaper said China was increasingly investing in U.S. space industry start-ups, including the one in World View, even as it increased its cyberattacks on U.S. technology companies. The article noted that the Justice Department had charged Chinese hackers with stealing data from 45 technology companies and government agencies, including NASA. It also highlighted a decision by Boeing to cancel a satellite order with Global IP, a Los Angeles-based start-up, following a Wall Street Journal investigation that shed light on a $200 million investment by a Chinese company into the startup.

In 2021, the U.S. intelligence community in a Global Risk Assessment report warned that China was working to weaponize space and gain a strategic edge in operations “integral to potential military campaigns by the [People’s Liberation Army].”

Since the China spy balloon controversy rattled Washington earlier this month, U.S. intelligence sources have confirmed that China’s balloon fleet is part of a broader effort to beat the U.S. on a new near-space battlefield.

Brendan Mulvaney, the director of the China Aerospace Institute, a research center serving the U.S. Air Force, told RCP that China has gone to great lengths to build up its technological high-flying balloon capabilities – some quite publicly.

“I remind people that not only does China steal technology, but they are more than willing to legally purchase it, invest in it, hire people, etc., whenever possible,” he said in an email. “Without knowing the exact details, it’s hard to say how this [near-space balloon technology] information was transferred, but we can say for sure that this and other technology is making its way to China.”

Yet, if U.S. intelligence knew about the coming threat, why didn’t it prevent Chinese investments in U.S. space exploration companies?

The Committee on Foreign Investments in the U.S. is designed to monitor and prevent U.S. adversaries’ influence on U.S. companies that could be detrimental to national security. But the agency usually focuses on mergers and doesn’t prevent smaller start-up investments from Chinese companies, experts told RCP.

In recent years, U.S. agencies have instituted several safeguards to monitor foreign investment and restrict the flow of high-tech exports to China and other adversaries. The Treasury and Commerce Departments also have slapped sanctions on Chinese companies widely known for their surveillance products.

In early February, the U.S. Department of Commerce’s Bureau of Industry and Security added six Chinese companies linked to People’s Liberation Army aerospace programs to a sanctions blacklist for being a “national security threat” as a result of the tension between Washington and Beijing over the incursion of a hot air balloon in U.S. airspace.

As a result, the six Chinese companies are prohibited from obtaining U.S. goods and technologies without prior authorization or a license from the U.S. Government. 

Amy Mitchell, a former senior official at the Departments of State and Defense, said the U.S. government could do far better than this scattershot approach with its Chinese sanctions. Instead, lawmakers should be establishing some across-the-board prohibitions for Chinese investments and U.S. exports, she said.

“It can be some decoupling of the very problematic companies, it can be additional sanctions – there are multiple ways to do this,” Mitchell told RCP. “But what we are doing right now is like whack-a-mole. We don’t have one kind of comprehensive approach to this issue, and the first step is closing the loopholes in the current system that the CCP is exploiting.”

Others urge a more cautious approach. Matt Turpin, a visiting fellow at Stanford’s Hoover Institution who served on the National Security Council during the Trump administration, warns against going too far in arbitrarily passing punitive laws aimed at China that could weaken U.S. competitiveness.

In a capitalist system, arbitrarily changing private investment rules will “disadvantage the companies in the long term,” Turpin said. “So, we want to be certain about where to draw the lines.”

On the flip side, Chinese companies – even those closely affiliated with PLA and some that the U.S. has sanctioned – are increasingly funded by U.S. investors. Many China companies also are listed on U.S. stock exchanges.

“We need to plug the holes,” Mitchell said. “We have to come up with a formula that protects our national security, and for some reason, we’re just not doing it.”

According to the 2021 Annual Report to Congress of the U.S.-China Economic and Security Review Commission, U.S. holdings of Chinese equity and debt securities have risen by 57.5% since 2017 to $1.2 trillion total.

Many Republicans want to force these Chinese companies to give up their listings on Wall Street if they refuse to open their books to U.S. accounting regulators. New laws could also bar them from raising money from American investors.

A Senate bill, sponsored by Sens. Todd Young and Mike Braun of Indiana and Marco Rubio of Florida, would prohibit investments in Chinese companies and entities reasonably believed to be involved in activities contrary to the national security or foreign policy interests of the United States. Rep. Mike Gallagher, who chairs the new House China Select Committee, plans to introduce a House version of the bill.

Gordan Chang, a Chinese American lawyer who lived and worked in Hong Kong for two decades, says Americans need to step out of their comfort zone and do far more to confront the growing national security and economic threat from China.

“China has a doctrine of civil-military fusion, which means that the Chinese military has access to everything that every Chinese company or university or research institution has gained,” he said. “So, if we ignore those differences between the U.S. and China, we are effectively allowing the Chinese to pillage the United States.”

“It’s a very simple question: If we want to survive, we’re going to have to take measures that once were considered to be extreme” against China.

The Boeing F/A-18 Super Hornet that replaced the Grumman F-14 Tomcat as the primary multirole fighter jet in the action drama “Top Gun: Maverick,” the sequel to the 1986 classic “Top Gun,” faces retirement after 40 years as the Navy’s workhorse. 

Boeing announced Thursday plans to end Super Hornet production in the second half of 2025. Boeing plans to continue F-15EX production but divert resources to future military aircraft programs. 

“We are planning for our future, and building fighter aircraft is in our DNA,” Steve Nordlund, Boeing Air Dominance vice president and St. Louis site leader, said in a statement. ​

Boeing’s 1,500 workers have been cranking out two F/A-18 family jets per month at its aircraft facility in St. Louis. It bought the facility in a 1997 acquisition of McDonnell Douglas. Since the F/A-18 Hornet was first introduced in 1983, around 2,000 of the fighter jets have been produced in different variants. Production of the Super Hornet began in 1995. 

“As we invest in and develop the next era of capability, we are applying the same innovation and expertise that made the F/A-18 a workhorse for the U.S. Navy and air forces around the world for nearly 40 years,” Nordlund said. 

F/A-18 Super Hornet

Top Gun: Maverick

To minimize layoffs, Boeing will keep the St. Louis area facilities and redeploy its Super Hornet workforce in other programs. 

The Super Hornet is the second aircraft Boeing has either retired or announced retirement this year. The first was the 747 jumbo jet on Feb. 1. 

WSJ pointed out, “the seeds of Boeing’s shrinking combat jet business lie in its 2001 loss to Lockheed Martin Corp. for the contract to build what became the F-35, the world’s largest defense program.” 

Considering Top Gun: Maverick’s impressive box-office success worldwide last year, it might suggest Hollywood could produce another sequel sometime this decade. If so, scriptwriters will likely replace the Super Hornet with a stealth fighter. Who knows, the ‘Darkstar’ hypersonic plane might be a reality when the next movie is released.

Authored by MN Gordon via EconomicPrism.com,

Bear markets take time.  They also provide countless occasions to lose money.  With each bounce comes an opportunity for investors to buy higher so they can later sell lower.

Major U.S. stock market indexes hit what is likely an interim bottom in the fall of 2022.  Since then, they’ve bounced with incredible vitality.  The bounce has brought new confidence to investors at what may end up being the worst possible time.

Many smart people have misconstrued the bear market rally – a sucker’s rally – as the origins of a new bull market.  After January’s stellar performance to start the New Year, calls of a bull market have come far and wide.

Maybe these bull market calls are right.  Maybe the stock market’s selloff this week was merely a consolidation period.  And the major stock market indexes will soon charge past their all-time highs from over a year ago.  We’re not so sure.

Billionaire investor Jeremy Grantham, and co-founder of the Boston-based money manager GMO, recently provided a well-reasoned assessment of where the stock market, as measured by the S&P 500, is headed.  In his 2023 outlook letter, After a Timeout, Back to the Meat Grinder!, which was published on January 24, Grantham noted:

“While the most extreme froth has been wiped off the market, valuations are still nowhere near their long-term averages.  My calculations of trendline value of the S&P 500, adjusted upwards for trendline growth and for expected inflation, is about 3,200 by the end of 2023.  I believe it is likely (3 to 1) to reach that trend and spend at least some time below it this year or next.”

As of Thursday’s close, the S&P 500 was at about 4,012.  Thus, to hit 3,200, the S&P 500 would have to fall 20 percent.  What to make of it?

Reversion to the Mean

The S&P 500 may not be as insanely overvalued as it was 16-months ago.  But it is still radically overvalued by historical norms.  The Shiller’s cyclically adjusted price-to-earnings (CAPE) ratio is currently at 29.14, which is well above its historical mean of 17.

Unless, something has changed, and the past averages no longer apply, the stock market, as measured by the S&P 500, still has a lot further to fall.  More than likely, the decline will be coupled with some sort of financial panic that spurs people to make a run for the exit.  In fact, as noted by Grantham, a 50 percent decline is well within the realm of possibility.

“Even the direst case of a 50 percent decline from here would leave us at just under 2,000 on the S&P, or about 37 percent cheap.  To put this in perspective, it would still be a far smaller percent deviation from trendline value than the overpricing we had at the end of 2021 of over 70 percent.  So you shouldn’t be tempted to think it absolutely cannot happen.”

Grantham, if you’re unfamiliar with his work, has accurately predicted several bubbles over his lengthy career.  He correctly predicted the Japanese Nikkei stock market bubble in the late 1980s, the dot com bubble in 2000, and the housing bubble in the mid-2000s.

Grantham’s philosophy is very pragmatic.  His focus is centered on a basic financial principle: ‘reversion to the mean.’

This is an observation that all asset classes and markets will revert to mean historical levels from highs and lows.  And by Grantham’s estimation the decline in 2022 was not nearly enough to bring the S&P 500’s valuations back in line with its historical average.

Think Again

The stock market freefall that took place on Tuesday [February 21], dropped the Dow Jones Industrial Average (DJIA), the S&P 500, and the NASDAQ by 2.06 percent, 2.00 percent, and 2.50 percent, respectively.  This may not be much in the grand scheme of things.  But it was a good reminder that there is still plenty of danger imbedded in today’s prices.

In addition, when you factor in rising treasury yields, and the newfound allure of holding bonds, stocks become especially dangerous.  A 12-month treasury note, for example, is yielding over 5 percent.  Will the S&P 500 increase by 5 percent over the next 12 months?

Certainly, it could.  It may even rise more.  But, based on Grantham’s analysis, it could also lose 20 percent – or even 50 percent.

At what point does the risk of stocks become outweighed by the reward of bonds?

That’s up to each individual to decide, given their time horizon and appetite for risk.  Nonetheless, for many people, accepting a 5 percent yield – which is still below the rate of consumer price inflation – beats rolling the dice for a potential 20 percent loss.

And as yields rise higher, in the face of an overvalued stock market, the reward of bonds becomes more enticing.  At some point, investors will transfer more and more of their portfolios from stocks to bonds.  This drain of capital from the stock market will pull the indexes down.

This is all a very natural occurrence.  The relationship between interest rates and stock market or other asset prices isn’t complicated.  Tight credit generally produces lower asset prices.  Loose credit generally produces higher asset prices.

After two decades of artificially low interest rates, courtesy of the Federal Reserve, a massive stock market bubble was inflated.  If you think the decline of the major stock market indexes that took place from roughly January 2022 to October 2022 is all that was needed to expunge the prior excesses, you should think again.

Here’s why…

Fear and Greed with a Roll of the Dice

Warren Buffett, in the 1986 Berkshire Hathaway shareholder letter, offered the following insight:

“[O]ccasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community.  The timing of these epidemics will be unpredictable.  And the market aberrations produced by them will be equally unpredictable, both as to duration and degree.  Therefore, we never try to anticipate the arrival or departure of either disease.  Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

This remark is a classic contrarian view on stock markets and the, sometimes, wild price swings that are experienced.  The observation relates to market psychology.  Investors, as a group, are compelled by emotions of fear and greed.

Rising markets attract emotions of greed, as investors bid up prices in the hopes of even higher prices.  When the bubble inevitably pops and the market falls, fear takes over, and investors sell just as the market bottoms.  Buffett’s advice is to do the opposite of the herd.

This all sounds well and good.  But it is easier said than done.  Clearly, the U.S. stock market indexes were overtaken by greed in 2021.  Smart investors sold prior to the market’s peak and sat out the decline.

But did they buy back in at the stock market’s interim bottom in October 2022?  Some did.  However, others didn’t.  Moreover, how does an investor know when the stock market’s consumed by fear and when it’s consumed by greed?

For what it’s worth, and it may not be worth much, CNN Business provides a Fear & Greed Index.  The index compiles seven different indicators, including: market momentum, stock price strength, stock price breadth, put and call options, junk bond demand, market volatility, and safe haven demand.

The index gives each indicator equal weighting in calculating a score from 0 to 100, with 100 representing maximum greediness and 0 signaling maximum fear.  Currently, the index is at 63, which is firmly in the greed range.

In summary, according to Grantham, the stock market has further to fall to revert to its historical mean.  The reward of treasuries is starting to outweigh the risk of stocks.  Buffett says you should be fearful when others are greedy.  The Fear & Greed Index is standing firmly in the greed range.

What to do?

You could always roll the dice, buy shares of Tesla, and hope for the best. 

You’d certainly be in good company.  As of last week, retail investors had poured $9.7 billion into Tesla so far this year.

But by our rough assessment, lightening up on equity positions and going fishing for a few months is the better option.

*  *  *

No investing strategy is complete without considering geopolitical factors.  For this reason, I just put the finishing touches on a unique Special Report.  It’s called “War in the Strait of Taiwan?  How to Exploit the Trend of Escalating Conflict.”  You can access a copy here for less than a penny.

At a moment Sweden alongside Finland is seeking to join NATO, a process which has been stalled due to Turkish objections, the Swedish government has announced it is planning to deliver “around” 10 Leopard 2 tanks and anti-air systems to Ukraine.

“We have decided to deliver Swedish Leopard 2 tanks to Ukraine,” Prime Minister Ulf Kristersson said in a press briefing upon the one-year anniversary of the war. Defense minister Pal Jonson in follow-up confirmed that “around ten” tanks would be sent, and they were identified as the “Leopard 2A5” models.

The government also aid it will be delivering the IRIS-T and HAWK anti-air missile systems as part of the package. The deliveries will be coordinated with Germany, after in late January both Washington and Berlin jointly agreed to allow Western tanks to be transferred to Ukraine as part of the war effort.

The Swedish prime minister’s office further said the new deliveries will help Ukraine “win the war” after Stockholm decided to join the “Leopard family”…

Sweden is joining the “Leopard family” in support of Ukraine, through Swedish Leopard 2 tanks. Today’s military package also includes further air defence components. We will continue to help Ukraine win the war.

— SwedishPM (@SwedishPM) February 24, 2023

And yet, like other European countries which have been directly backing Kiev, Sweden is having its own struggles keeping up with domestic defense readiness and capability, as Breaking Defense details:

The newly published Swedish armed forces annual report 2022 has laid out a number of operational and industrial difficulties facing the Scandinavian nation, which include supply chain shortages and a pilot crisis causing Gripen fighter jet flight hours to fall by nearly 12 percent compared to 2021.

Across 2022, the war in Ukraine and supplier shortages led directly to struggles with maintenance of military equipment and “major delivery deviations” arising, such as delay to the new signals intelligence vessel HSwMS Artemis, according to the report.

Meanwhile, Russia is likely to continue pressuring Turkey to remain firm in its resolve to block Sweden’s NATO accession. 

But Sweden has remained optimistic with Swedish Foreign Minister Tobias Billström telling CNBC this week that “of course it is” really happening, when asked about joining NATO.

“We, after all, have 28 member states of the 30 who are already members of NATO who have already ratified the applications for Sweden and Finland. So yes, of course, this is just a matter of time,” Billström said. However, Turkey doesn’t seem any closer to giving approval, and Finland has even recently indicated it’s ready to join without Sweden.